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'Just one of us': Consumers playing oligopoly in mixed markets

  • Marco, Marini
  • Alberto, Zevi

Consumer cooperatives represent a highly successful example of democratic form of enterprises operating in developed countries. They are usually medium to large-scale companies competing with the profit-maximizing firms in the retail sector. This paper describes this situation as a mixed oligopoly in which consumer cooperatives maximize the utility of consumer-members and, in return, refund them with a share of the profits corresponding to the ratio of their individual spending to the cooperative's total sales. We show that when consumers possess quasi-linear preferences over a bundle of symmetrically differentiated goods, and companies operate using a linear technology, the presence of consumer cooperatives positively affects total industry output, as well as welfare. The effect of cooperatives on welfare proves to be even more significant when goods are either complements or highly differentiated, and when competition is à la Cournot rather than à la Bertrand.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 31213.

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Date of creation: 01 Aug 2010
Date of revision: 30 May 2011
Handle: RePEc:pra:mprapa:31213
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  1. Cremer, Helmuth & Marchand, Maurice & Thisse, Jacques-Francois, 1989. "The Public Firm as an Instrument for Regulating an Oligopolistic Market," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 283-301, April.
  2. Hart, Oliver & Moore, John, 1996. "The Governance of Exchanges: Members' Cooperatives versus Outside Ownership," Oxford Review of Economic Policy, Oxford University Press, vol. 12(4), pages 53-69, Winter.
  3. Marco Marini & Alberto Zevi, 2010. "Consumer Cooperatives and Welfare in a Mixed Oligopoly," Working Papers 1010, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2010.
  4. Oliver Hart & John Moore, 1998. "Cooperatives vs. Outside Ownership," STICERD - Theoretical Economics Paper Series 346, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  5. Farrell, Joseph, 1985. "Owner-consumers and efficiency," Economics Letters, Elsevier, vol. 19(4), pages 303-306.
  6. de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-11, April.
  7. Tennbakk, Berit, 1992. "The Case of Cooperative Mixed Duopoly," Institute for Research on Labor and Employment, Working Paper Series qt8wp406w7, Institute of Industrial Relations, UC Berkeley.
  8. Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
  9. David Kelsey & Frank Milne, 2010. "Takeovers and cooperatives: governance and stability in non-corporate firms," Journal of Economics, Springer, vol. 99(3), pages 193-209, April.
  10. Fulton, Murray E., 1989. "Cooperatives in Oligopolistic Industries: The Western Canadian Fertilizer Industry," Journal of Agricultural Cooperation, National Council of Farmer Cooperatives, vol. 4.
  11. Svend Albæk & Christian Schultz, 1998. "On the relative advantage of cooperatives," CIE Discussion Papers 1998-02, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  12. Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March.
  13. de Fraja, Giovanni & Delbono, Flavio, 1990. " Game Theoretic Models of Mixed Oligopoly," Journal of Economic Surveys, Wiley Blackwell, vol. 4(1), pages 1-17.
  14. Mikami, Kazuhiko, 2010. "Capital procurement of a consumer cooperative: Role of the membership market," Economic Systems, Elsevier, vol. 34(2), pages 178-197, June.
  15. Frank Milne & David Kelsey, 2006. "Takeovers and Cooperatives," Working Papers 1113, Queen's University, Department of Economics.
  16. Pennerstorfer, Dieter & Weiss, Christoph R., 2007. "Do Cooperatives Offer High Quality Products?," 103rd Seminar, April 23-25, 2007, Barcelona, Spain 9403, European Association of Agricultural Economists.
  17. Arthur L. Bekenstein, 1943. "A Theoretical Analysis of Consumer Co-Operatives: The Managerial Problem," Journal of Political Economy, University of Chicago Press, vol. 51, pages 251.
  18. Cremer, Helmuth & Cremer, Jacques, 1992. "Duopoly with employee-controlled and profit-maximizing firms: Bertrand vs Cournot competition," Journal of Comparative Economics, Elsevier, vol. 16(2), pages 241-258, June.
  19. Peter J. LAW & Geoff STEWART, 1983. "Stackelberg Duopoly with an Illyrian and Profit-Maximising Firm," Discussion Papers (REL - Recherches Economiques de Louvain) 1983026, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  20. Murray Fulton & Konstantinos Giannakas, 2001. "Organizational Commitment in a Mixed Oligopoly: Agricultural Cooperatives and Investor-Owned Firms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1258-1265.
  21. Corneo, Giacomo G., 1997. "Taxpayer-consumers and public pricing," Economics Letters, Elsevier, vol. 57(2), pages 235-240, December.
  22. Frank Milne & David Kelsey, 2006. "Imperfect Competition and Corporate Governance," Working Papers 1079, Queen's University, Department of Economics.
  23. repec:adr:anecst:y:1994:i:33:p:06 is not listed on IDEAS
  24. Mikami, Kazuhiko, 2003. "Market power and the form of enterprise: capitalist firms, worker-owned firms and consumer cooperatives," Journal of Economic Behavior & Organization, Elsevier, vol. 52(4), pages 533-552, December.
  25. Goering, Gregory E., 2008. "Welfare impacts of a non-profit firm in mixed commercial markets," Economic Systems, Elsevier, vol. 32(4), pages 326-334, December.
  26. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
  27. V. James Rhodes, 1983. "The Large Agricultural Cooperative as a Competitor," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(5), pages 1090-1095.
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